The financial crisis gripping the UK care home sector

The financial crisis gripping the UK care home sector

What are the key pressure points putting care homes at risk of financial failure? Steve Parker, a licensed insolvency practitioner and a partner at Opus Restructuring and Nick Hood, business risk analyst at Company Watch, share their views.

Original news

Press release: Care home sector strengthens, but one in four care home businesses is still financially vulnerable : http://www.companywatch.net/wp-content/uploads/2014/02/Company-Watch-One-in-four-care-homes-still-financially-vulnerable-20140228.pdf

Updated research into the financial health of UK care home companies from Company Watch, specialists in tracking and predicting corporate financial health worldwide, confirms that despite some signs of improvement in the sector, almost a quarter of carehome operators are in its Warning Area six months on from its original study.

What does the latest Company Watch report reveal?

The parlous state of the finances of the UK's 20,000 care homes was first revealed last summer when Company Watch published research showing that almost a third of care home operators were in their Warning Area--indicating heightened risk of insolvency or a major restructuring (see Press release: One in three care home businesses are financially vulnerable).

Now Company Watch has updated its statistics, analysing the latest accounts of 5,037 companies which operate care homes. They found that despite some marginal improvements, nearly a quarter are still financially vulnerable and worse still, that 682 of them have negative balance sheets with debts higher than their assets.

Another adverse finding is that borrowings across the entire care home sector average 75% of net assets, an abnormally high level linked originally to buying the properties in which the homes are located but now pushed ever higher by trading losses. The exposure this causes to the widely anticipated rise in interest rates during in 2015 or even s

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.